Electricity

Serbia proposes national CO2 pricing system instead of regional ETS

Serbia national carbon pricing system instead regional ETS

Photo: Emilija Jovanović / Ministry of Mining and Energy

Published

July 4, 2024

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Published:

July 4, 2024

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Serbia is analyzing the impact of the European Union’s Carbon Border Adjustment Mechanism. Serbia could accept taxing emissions on a national level at fixed prices instead of the option of introducing a regional emissions trading system like EU ETS, Minister of Mining and Energy Dubravka Đedović Handanović said.

An informal Energy Community ministerial meeting was held in Banja Luka in Bosnia and Herzegovina, with the participation of representatives of the European Commission. Minister of Mining and Energy of Serbia Dubravka Đedović Handanović said her country is continuing to align with EU regulations. The amendments to the Law on Energy will be adopted by the end of the year, setting the regulatory conditions for integrating with the single European electricity market, she pointed out.

“I believe it is very important for us to join the single European electricity market and we are diligently working on that while considering national interests. I will recall that Serbia is the only country in the region both with a functional intraday and day-ahead electricity market as well as that we are part of a regional exchange with two EU members – Hungary and Slovenia,” she stated.

Ministry is determining most acceptable option for Serbia for taxing CO2 emissions

Đedović Handanović stressed that an analysis and impact assessment on the national level is underway regarding the introduction of the Carbon Border Adjustment Mechanism (CBAM). The Ministry of Mining and Energy is working to identify the most acceptable option for taxing carbon dioxide emissions, she asserted.

The European Union started the transitional period within CBAM in October. Importers of electricity, aluminum, cement, fertilizers, hydrogen, iron and steel will be charged a tax from 2026 for the greenhouse gas emissions that were created during production.

Their suppliers from third countries, such as the Western Balkans and Turkey, are already obligated to measure their emissions and send data to their clients inside the EU – the importers or CBAM declarants – who report on a quarterly basis.

Producers of the said commodities and electricity inside the 27-member bloc already pay a climate levy through the Emissions Trading System – EU ETS. It gives their competitors in third countries an advantage, which the EU intends to adjust through CBAM. The third countries can achieve exemption by introducing their own emissions trading systems.

Predictability for companies in period of adaptation

The minister said in Banja Luka that one of the more acceptable options is to tax CO2 on the national level. She argued that such a system, with a fixed price, would secure predictability for companies in their adaptation period.

“Introducing a regional carbon emissions trading system by 2030 with the same price as in the EU and under its current model is not an option for Serbia, primarily because the financial implications would be too big and the application would be complex. Serbia is planning to be part of the EU ETS system, on its European Union accession path, for which, in addition to analysis and technical assistance from the Energy Community, we need some financial aid from the European Union as well as a sustainable period for implementation, after 2030, when we will have built sufficient green energy capacities,” Đedović Handanović underscored.

She said Serbia is beginning its just energy transition, that it’s a long and expensive process and that it is necessary to enable access to EU funds to conduct it in a sustainable way. In her view, one of the possible solutions is to form a Western Balkans regional just transition fund that the EU would support.

Serbia rolled out additional security measures after cascade breakdown in electricity supply in Western Balkans

Turning to the recent chain failure in electricity supply in the neighboring countries, to an extent unseen in decades in Europe and which didn’t affect Serbia, Đedović Handanović said there are now additional security and caution measures at hand.

“Overhauls at production capacities and the transmission and distribution network maintenance, alongside modernization efforts, are going according to plan. Coal stockpiles and gas storage facilities are well filled and we will keep working on additional measures for the forthcoming heating season,” the minister added.

Lorkowski: Delays in transposing EU regulations jeopardize possibility of CBAM exemption

Deputy Director General of the European Commission’s Directorate-General for Energy (DG ENER) Mechthild Wörsdörfer reiterated the EU’s commitment to supporting Energy Community Contracting Parties in the region’s energy transition and called for enhancing regional cooperation. Market coupling will bring important benefits to the region’s economies and competitiveness as well as supporting efforts for achieving climate neutrality, she said.

Market coupling aims to fully integrate Contracting Parties into the EU’s single electricity market through mechanisms like single day-ahead and intraday coupling (SDAC and SIDC, respectively), enhancing efficiency and cross-border electricity trade. The ministers centered around two main topics with regard to the process: the alignment of the national legislation with the EU law and the fully compliant designation of nominated electricity market operators (NEMOs) in the contracting parties, the Energy Community Secretariat said.

The introduction of any CO2 pricing mechanism hinges on the transposition of the MRVA package into domestic legislation

Further delays in transposing and implementing the Electricity Integration Package pose a significant challenge to achieving the exemption for electricity exports from the Energy Community to the European Union from 2026, according to the secretariat’s Director Artur Lorkowski.

Director of International Affairs and Climate Finance at the Directorate-General for Climate Action (DG CLIMA) Diana Acconcia stressed that the transposition of the Monitoring, Reporting, Verification and Accounting (MRVA) package should become a priority. It would be the basis for any carbon pricing option, she explained.

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